Dr. Bea Bourne 1

2 If you have any troubles in seminar, please do call Tech Support at: They can assist if you get “bumped” from the seminar room or experience other difficulties.

 This unit covers material that is critical to the success of the sales manager. Forecasting can make or break an organization's plans and ability to fulfill orders.  Questions 3

 Last week we focused on sales organizational structures and sales force deployment. 4

 This chapter presents a look at several of the key ways sales managers perform this vital information management role including forecasting sales, setting quotas, establishing the size and territory design of the sales force, and performing sales analysis for managerial decision making.  The seven basic models for sales forecasting include: Moving Averages  Exponential Smoothing  Decomposition Method  Survey of Buyer Intentions  Jury of Executive Opinion  Delphi Method  Sales Force Composite Method 5

By the end of this unit, you should be able to:  Discuss the differences between market potential, sales potential, sales forecast, and sales quota  Understand the various methods by which sales managers develop sales forecasts.  Outline the process of setting a sales quota.  Explain the various types of quotas used in sales management.  Discuss key approaches to determining sales force size.  Describe the sales territory design process.  Understand the importance of sales analysis for managerial decision making.  Conduct a sales analysis. 6

 What is a sales forecast? 7

8  A sales forecast can be described in many ways.  In simple terms, a sales forecast is a prediction based on past sales performance and an analysis of expected market conditions.

 Why are sales forecast important? 9

10  Conducting a sales forecast will provide a business with an evaluation of past and current sales levels and annual growth, and allow managers to compare the company to industry norms.  It will also helps establish policies so that managers easily can monitor prices and operating costs to guarantee profits and make managers aware of minor problems before they become major problems.

 Sales forecasts also provide the bases for sales management decisions including determining sales force size, territories, quotas, and budgets. What is a quota? 11

 Just how do we see into the future?  How far ahead can we see with accuracy? 12

 The true value in making a forecast is that it forces us to look at the future objectively.  The company that takes note of the past stays aware of the present and precisely analyzes that information to see into the future. 13

 Other sales management decisions influenced by sales forecasts include: determining sales compensation levels, sales performance evaluation, and evaluating prospective accounts. 14

 Top-down and bottom-up forecasting. 15

 What is a top-down forecasting approach? 16

17  Top-down approaches typically consists of different methods for developing company forecasts at the business unit level.  Sales managers then break down these company forecasts into zone, region, district, territory and account forecasts.

What is the bottom-up approach to forecasting? 18

 Bottom-up approaches consist of different methods for developing sales forecasts for individual accounts.  Sales managers then combine the account forecasts into territory, districts, region, zone and company forecasts. 19

 The three company forecasting methods: ◦ moving averages, ◦ exponential smoothing and ◦ the decomposition method. 20

21 The moving averages method is a relatively simple method that develops a company forecast by calculating the average company sales in previous years. So, the company sales forecast for next year is the average of actual company sales for the past three, four or six years. The moving averages method is good in situations where sales forecasts are needed for a large number of products and they have stable sales. A grocery store would be a good example of a type of company that would use this approach. Issues for the moving averages method are that it requires a large amount of historical data and this methods assigns equal weight to each period. Ignoring the fact that more recent periods have more impact on future sales. The moving averages method

22  Exponential smoothing The exponential smoothing forecasting model is a type of moving averages method, except that company sales in more recent years are weighted differently from company sales in past years. This method is fairly simple to understand and use... plus, there are software models available to help you design your forecast.

 The decomposition method involves different procedures that break down previous company sales data into four major components trends, cycle, season and erratic events.  These components are then reincorporated to produce the sales forecasts.  Decomposition methods are sound conceptually.  But often require complex statistical approaches for breaking down the company sales data into the trend components. 23 The decomposition method

24 So we discussed the top-down approaches to forecasting. Lets look at a few bottom-up approaches. Our text discuses 4: the survey of buyer intention method, jury of executive opinion, the Delphi method, and the sales force composite method. Bottom-up approaches

25  The survey of buyer intention method is any procedure that asks individual accounts their purchasing plans for a period of time and translates these responses into account forecasts. Survey of buyer intention

26  The jury of executive opinion method involves any approach in which executives of the firm use their expert knowledge to forecast sales to individual accounts. Jury of executive opinion

 The Delphi method is similar to the jury of executive opinion method but more structured.  Forecast are submitted anonymously by mangers for each account and then summarized.   The Delphi method eliminates confrontation and argument that you will see occasionally when the jury of executive opinion is used.  27

 With the sales force composite method, the method I am most familiar with, the salespeople provide forecasts for their own accounts through specially designed forms.  So what are the advantages of forecasting using this method?  Forecasts uses input from persons closets to the actual accounts and markets.  No other better way to do it. 28

 What factors are important? What types of sales are easy to forecast? Why? What types are difficult? Why? 29

 What can a sales manager do to increase the accuracy of forecasts?  How often should forecasts be reviewed?  How do we look back and evaluate the process of sales forecasting within an organization? 30

31 The quiz is a review of the unit reading to test your knowledge and understanding. There are 15 questions, no time limit and it can be taken multiple times. Note this quiz must be taken by the end of this unit to earn points.

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 I appreciate your time and attention during our 1 hour seminar today. If you have questions, feel free to contact me: and I’ll be happy to help!  See you in Class! 33